Welcome to the LCCS blog!

LCCS is the first and only fully online Low Cost Corporate Services provider in HK.

Our platform is a very user-friendly website supporting company formation and providing virtual hosting (registered address), as well as company secretarial services to maintain Hong Kong limited companies statutory records properly, following Hong Kong laws and regulations.

LCCS also offers accounting solutions through another user-friendly online application, and supervision to issue management accounts as well as Annual Audit and Tax Filing coordination.

With LCCS, you do not need to install any software or backup your data because we are cloud based. All your data is automatically and safely backed up. And being cloud based, LCCS solutions are also available anytime, from anywhere.

This is how LCCS offers very competitive prices while maintaining a high-quality level of services.

Enjoy LCCS, a combination of DIY (1) and professional expertise that will help you save money on handling data while we back you up and save your time on submitting and updating records.

A revolutionary way to do company formation and maintenance. Simple and cheap, as it always should be!

(1) DIY: Do-It-Yourself.
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Top 10 Reasons to Setup a Company in Hong Kong

Hong Kong Skyline Top 10 Reasons Formation

1. Located in the heart of Asia, Hong Kong is well located to access China and other countries in the region.

2. Setting up a business in Hong Kong is quick; incorporation can be completed within a week.

3. 100% ownership by a foreigner is permitted; there are no restrictions as to the nationality of the owner.

4. Scope of business is not limited to the declared business nature.

5. Excellent business infrastructure and facilities.

6. The tax system is simple and low with the profits tax rate being only 16.5% and salaries tax is a maximum of 15%.

7. Territorial tax system mean tax is only payable on profits derived within Hong Kong. Learn more here.

8. English common law is adopted, i.e., the legal system is independent of Mainland China. It is a stable and predictable system.

9. Multilingual workforce. The majority of the local workforce can speak English as well as Cantonese and Mandarin (main language in Mainland China).

10. Hong Kong is less regulated in comparison to the surrounding countries in the region. Want to know which activities ARE regulated? Read this.

Check out the rest of our blog for more useful information on Hong Kong company and set up. Ready to proceed? Click the button below.

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Setting Up A Non Profit Organization In Hong Kong

Our post How Can You Structure Your Business in HK? Covered the most common types of business organization in Hong Kong for commercial undertakings. But what if you need a company for non-profit making purposes? For a non-profit entity, the most common choice is a Hong Kong company limited by guarantee.

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Common Purposes for a Company Limited by Guarantee

A company limited by guarantee is more commonly used for trade associations, clubs, professional, learned societies, and some religious bodies rather than for commercial purposes. Although, note that while this type of company is used for non-profit purposes, it is not a charity and is not exempt from tax. To set up a charitable organization, you should consult a legal firm who can assist to tailor make the company’s Articles of Association and get exemption before incorporation.

Requirements for Set Up

When setting up a company limited by guarantee take note that upon set up you must have at least 2 directors, 1 founder member, a company secretary and a registered office address.

All directors of the company must be natural persons i.e. they cannot be corporate. Members meanwhile can be either corporate or individual. While there is no restriction on the nationality and resident status of either directors nor shareholders.

For more information about the role/purpose of directors, company secretary and registered office address you may refer to our posts as follows:

As for members, however, note that they are NOT the same as shareholders. Members are not required to make any capital payment, so they don’t own the company but can be considered as the decision makers. Accordingly, members don’t receive any dividends and have no claim upon the assets of the company. Rather, they undertake to contribute a fixed amount (minimum HKD1) to the assets of the company in the event of its being wound up while they are members, or within one year after they cease to be members. Note that each member must contribute the same amount.

Ongoing Compliance

Remember that after set up you will need to maintain your company. You will need to file an Annual Return to the Companies Registry (“CR”) and pay to the Inland Revenue Department (“IRD”) an annual registration fee to renew the Business Registration of the Company. Changes to the directorship, company secretary, and registered office must be reported to the CR. Annual audit and tax filing are also required, for more details on how this should be done, please read our article Accounting, Audit, and Tax Filing: HK Requirements and Best Practices.

Ready? Go!

Shall you decide to set up a company limited by guarantee for non-charitable purposes you can go ahead and approach a service provider to assist.

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From Sole Proprietorship to Hong Kong Company

So, you started off with a sole proprietorship, and now you’re thinking of taking the leap to setting up a fully-fledged Hong Kong company. Before you embark on this exciting new step in your entrepreneurial journey, there are a couple of things you need to know.

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You Can’t ‘Convert’ Your Sole Proprietorship into a Hong Kong Company

A sole proprietorship and a Hong Kong limited company are completely separate and different types of organizations as explained in our article How Can You Structure Your Business in HK? As such, you cannot ‘transform’ one into another and vice versa. So, what does that mean?

You Must Apply For A New Business Registration Certificate (BRC)

It is not possible to ‘transfer’ the existing BRC of your sole proprietorship to your new Hong Kong company.

To cease business under your sole proprietorship, you will need to report cancellation of your related BRC to the IRD. As for your new Hong Kong limited company, when you proceed to incorporation you will need to apply for a new BRC unique to that company.

You Must Apply For A New Bank Account

When you form a new Hong Kong limited company, you will be starting completely from scratch. Your previous business, transactions, assets, liabilities, etc. under your sole proprietorship will have no bearing on your newly incorporated company.

A distinct separation between your personal and business finances is necessary. Accordingly, you should not use your personal account for your new company; you must open a new corporate bank account.

You May Need To Apply For Business Licences and Permits

As mentioned in our article Regulated and Non-Regulated Activities Hong Kong, few, but nonetheless some, business activities require a business licence or permit to operate. You cannot transfer existing licences/permits granted to your sole proprietorship to your new Hong Kong company. You will need to apply for a new licence or permit as necessary.

You’ll Need To Maintain Your New Company

As you may already know, sole proprietorships are known for being super simple and cheap to register and maintain, whereas a Hong Kong limited company is more complicated and expensive to set up and maintain. For an overview of the minimum maintenance costs you could expect to incur operating a Hong Kong limited company, check out our article, Can You Afford To Incorporate AND Maintain An HK Company?

Why Should You Move From Sole Proprietorship To Hong Kong Limited Company?

When you register as a sole proprietor, although it is easier and less of a burden to do so, you are personally liable for the business. So, as you are personally involved and exposed, when the business grows bigger, the risk is higher and you may then consider separating from your personal body by creating a corporate body.

With that said, if your business is still only very minimal, is low risk and does not carry any liabilities, then you may consider remaining as a sole proprietor. However, if your business is already growing a significant amount, you could benefit from the protection a limited liability company can provide. Not to mention, a limited liability company is considered to be more stable than a sole proprietorship, which may make it easier to source funds from financial institutions and approach investors who tend to shy away from non-incorporated entities.

Ready to set up your Hong Kong limited company? LCCS can help, just click the button below!

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New Company vs. Shelf Company

Ever wondered what the difference is between setting up a new company versus buying a shelf company? Well all your questions are about to get answered. Just check out our latest graphic comparing both options so you can decide which one is really for you.

New Company vs. Shelf Company

Ready to take the next step?

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Do I Still Need To Meet Basic Requirements If My Company Is Not Operating, Dormant or Deregistering?

We are often approached by entrepreneurs who have set up their HK limited company, but it has been a while, perhaps even years, and they have not commenced any business yet. Usually, the following misconceptions arise out of this situation, the owner might think:

  • “My company is ‘dormant’ so I do not need to comply with some basic requirements”;
  • “If I officially register as dormant I will not need to comply with some basic requirements”; or
  • “If I deregister I can simply proceed to dissolve my company and will not need to meet basic requirements.”

All those statements are untrue, in fact, they couldn’t be further from the truth. Just check out our posts Non-Trading Company, Dormant & Deregistration, and Deregistration Quiz: Are You Ready? How To? And you’ll see that there are quite a few requirements that you will still need to attend to. Meanwhile, for a quick overview of what is still required to be done you can check out our summary below. But note that this is only a basic comparison, you are highly recommended to read our other articles to gain a better understanding of the specifics.

Note by “Non-Trading Company” we mean a company that is not operating, while a “Checkmark” means you must comply on a regular basis. For details as to how often each requirement needs to be attended to and estimated cost of obtaining assistance to handle them take a look at our post Can You Afford To Incorporate AND Maintain An HK Company?

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Getting Your Documents Notarized, Apostilled and/or Legalized in Hong Kong

Notarization, apostille, and legalization are all methods of authenticating documents. In a corporate setting, you may be required to authenticate corporate documents and agreements for use outside of the country of incorporation. Recent examples that we’ve come across where authentication of a Hong Kong company’s corporate documents by at least one of these methods was required include: for opening a bank account overseas; for opening a WOFE (Wholly Owned Foreign Enterprise) in China; or for entering into an agreement with a company incorporated and whose operations take place in another country. Perhaps you are in the process of one of these actions but don’t know where to start to get your documents notarized, apostilled and/or legalized. If that is the case, then keep reading and have your questions answered.

Notary, Apostille and Legalization of documents

What is the difference?

Notarization

Only a notary public can notarize a document, either certifying a legal document as genuine or an original, authenticating a signature or certifying or witnessing a person’s identity. Depending on what the notarization is being used for and what is required the notary public may:

• Issue a notarial certificate;
• Make a certified copy of an original document; and/or
• Witness the signing of a document.

In most cases, a Hong Kong Notary Public is sufficient, but there are some exceptions. For example, when setting up a WOFE, a Chinese Notary is usually required.

Apostille

An apostille is used specifically for authentication of public documents with the purpose of making them fully legally recognizable in a foreign country. If the document will be used in a country party to The Hague Convention, apostille will usually be sufficient; otherwise, legalization may be required.

In Hong Kong, only the High Court can issue an apostille. But note that not all documents are eligible to be apostilled. Particularly, Apostille can be obtained on:

• Public documents that bear the true signature of an official party; and
• Documents signed by a notary public or a Commissioner of Oaths in Hong Kong.

For specific examples of what types documents can be apostilled see here.

Legalization

A document will usually first have to be notarized and/or apostilled before it can be legalized. Whereas legalization is normally only required if the document will be used in a country that is not a party to The Hague Convention.

Only the embassy or consulate of the foreign country in which the document will be used can legalize a document.

So which one do I need?

Before doing anything, you should first ask the authority or entity to whom the authenticated documents will be presented to, exactly what it is they require. Notarization, apostille and legalization are very different actions and as you can see from the above they are obtained in very different ways. Depending on the authority or entity you are obtaining the authentication for, you may be required to obtain just one or even all of them. So be careful.

Need help getting a document notarized, apostilled, and/or legalized? We can help!

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Offshore Companies vs. HK Companies Operating Offshore

We often get asked if we can help to set up an offshore company. The short answer is yes. However, the term “offshore company” can imply very different things as you can have a company that has been incorporated offshore usually in an offshore financial center or a company that is operating offshore (for the purpose of this article we will focus on HK companies operating offshore). The difference between the two is substantial hence we’ve decided to write this article to help clarify what they both mean and to give a quick overview as to why some people might consider them as options.

Offshore Companies

Offshore Companies

An offshore company usually refers to a company incorporated in countries commonly considered as “tax havens” such as the British Virgin Islands, the Cayman Islands, the Seychelles, etc. The favorable tax conditions in these offshore jurisdictions is an obvious plus, but another reason some might consider setting up in these countries is that shareholder and director information is not made public. Despite the benefits, however, nowadays, due to the implementation of the Common Reporting Standard, it can be quite difficult if not impossible to open a bank account in HK for companies set up in these regions.

HK Companies Operating Offshore

On the other hand, you can have a company incorporated in Hong Kong that operates offshore i.e. its business activities are carried on outside of Hong Kong. Generally, people choose this type of set up in order to take advantage of Hong Kong’s territorial taxation system which means tax is charged on local income only, that is to say, profits derived offshore are not taxed. It’s important to note however that offshore status is not automatic; you must apply for it. For more details on how to apply, please read our articles Hong Kong Taxation System: How To Apply For Profits Tax Exemption? And Tax Exemption At A Glance.

Know What You Need

So, as you can see, if you are considering either of the above, it is important to understand what you need to avoid any costly mistakes when setting up. While now you have a better understanding of what it is you need you can properly communicate what you actually want. You can also better understand what people are referring to while some may even perpetuate the confusion between the 2 options, not to mention that they tend not to explain properly the consequences of each option especially in terms of tax and banking.

Something still not clear? Contact us.

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How Can You Structure Your Business in HK?

If you’re thinking about setting up a business in Hong Kong, the first thing you should do is to consider the structure of your business. Considering our audience, we’ve decided to focus in on the most common types of business organization in Hong Kong for small to medium enterprises including the private limited company, sole proprietorship, partnership, branch office (a.k.a. the registered non-HK company), and representative office. Here we’re going to give you an overview of each of these business types to help you determine which one suits your needs best.

HK Company Organization Structure

Private Limited Company

A private limited company is considered to be more complex and expensive to set up and close down when compared to a sole proprietorship, partnership, and representative office. Meanwhile, this setup does require a bit more care due to the basic minimum requirements that must be met to keep the company legal. That said, in most cases, the benefits outweigh the disadvantages, which makes the private limited company the top choice for SMEs in Hong Kong.

So what are the advantages? A private limited company is a separate legal entity that can act as a natural person could; entering into agreements, sue or be sued, own property, etc. on behalf of its owners. This also means the owners are only liable for the amount they invest in the company. As a result, this type of entity is considered more stable, and it is, in turn, easier to find investors and source financing in comparison to the majority of other business types. Plus, private limited companies benefit from the territorial taxation system in HK which means 16.5% tax rate on profits derived from Hong Kong only, not to mention in HK we have no capital gains tax, sales tax, or VAT!

Last but not least, 100% foreign ownership of companies is permitted, so it is possible to set up a wholly-owned subsidiary company in Hong Kong making the private limited company a desirable choice for overseas companies looking to set up here as well.

Branch Office (Registered Non-HK Company)

For non-HK companies looking to set foot in Hong Kong, a branch office could be an option. A branch office is a legally registered entity that is considered as an extension of its foreign parent company i.e. it is not treated as a separate legal entity. This makes it a less attractive choice compared to setting up a subsidiary as mentioned earlier as it means that the parent company is liable for all the debts, etc. of its branch office. Even so, as there are fewer limitations for a branch office compared with the other option for foreign companies which is to set up a representative office, this could be considered the second-best choice after setting up a subsidiary for non-HK companies.

Representative Office

A representative office is very limited in that it is not considered a legal entity, i.e., it cannot enter into contracts, create invoices, etc. and is limited to non-profit making business activities such as marketing and research. The same as with a branch company, the parent company is fully liable for all debts, etc. of the representative office. On the other hand, this structure is easy to set up, there are no compliance requirements such as tax filing, maintaining accounts, etc. But due to the heavy limitations of this structure, this is only really an option for foreign companies wanting to explore the market and gain some exposure, or who simply want a presence in Hong Kong to carry out activities such as recruiting representative staff for instance.

Sole Proprietorship & Partnership

A sole proprietorship can be a good choice for sole owners intending to run a small low-risk business. It is easy to set up and to close down, while there is no restriction as to the type of business you can operate (providing it is legal of course!). That said, generally, a sole proprietorship is not recommended because the sole owner is 100% liable for the debts of the business, and the risky nature of this structure makes it almost impossible to find investors and source financing. Moreover, it is only really an option for HK residents, as non-residents must have a local agent to set up.

A partnership and a sole proprietorship are very similar, the main difference being that you must have at least two or more persons to set up a partnership. There are two types, a general and a limited partnership. The liability of partners in a general partnership is unlimited. While a limited partnership allows one or more partners to limit their liability to the amount they have invested in the business.

So… Which One Should You Choose?

The type of business organization you choose will depend on your particular setup, but some main points you should consider are (i) the amount of risk your business will involve; (ii) how many founders there are; (iii) how you intend to finance your business; (iv) how you plan to develop the business in future; and (v) whether you reside in Hong Kong or not.

That said, considering the exposure in terms of risk for partnerships and limitations regarding activities in some cases for sole proprietorships, partnerships, branch office, and representative office, versus a limited company. Overall, except in very particular circumstances, such as a sole HK resident wanting to initiate a very small business to test it out for example, a limited company could be considered to be the optimal organization structure.

Ready to incorporate? LCCS can help.

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 Want to talk to someone? Check out our website chat or drop us a message!

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Tax Exemption At A Glance

Contrary to popular belief, you cannot set up a company with offshore status in Hong Kong. You must apply for tax exemption in order to obtain this status. Check out our quick guide below to find out if you’re eligible, and how you can go about applying for tax exemption for your Hong Kong company. Have 5 minutes to spare? Check out our article Hong Kong Taxation System: How To Apply For Profits Tax Exemption?

Tax Exemption Hong Kong

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Big News! HK Business Registration Fee Waiver To Expire On 1 April 2017

For the past year, HK companies have been benefitting from the waiver of the HKD2,000 Business Registration Fee per the Revenue (Reduction of Business Registration Fees) Order 2016 (“2016 Order”). The 2016 Order, however, is about to expire on the 1 April 2017; this means that the fee to obtain or renew the Business Registration of a company will go back up to HKD2,250 (HKD2,000 business registration fee + HKD250 levy). Some providers might urge you to set up your HK company before the expiry in order to save HKD2,000, but first, we think you should consider, does it really make sense?

HK BR fee expired

First, take into consideration that HKD2,000 will not make a big difference when setting up a company. What we mean to say is, if you are scrambling to save that amount, you are likely not prepared to set up your company in the first place. We estimate you need a minimum of HKD15,355* which includes the costs to obtain the assistance of a professional, which is recommended to save you from making mistakes and incurring, even more, fees. Check out our article Can You Afford To Incorporate AND Maintain An HK Company for more info on the very minimum you should be prepared for.

Meanwhile, sooner or later you will need to pay the full HKD2,250 anyway as HK companies are required to renew their Business Registration every year. So, while you may save HKD2,000 initially by setting up before the 1 April 2017, the following year on the anniversary of your company you will need to pay the HKD2,000 whereas no one can tell if the next budget will include a waiver or not.

Finally, the expiry date of the waiver is in 3 weeks from now. Unless you really rush, you may not even have enough time to actually file before April 1st.

In conclusion, the only question that really matters is “Am I ready to set up a company or not?” Don’t be tempted to rush to meet the deadline just to save HKD2,000, because, in the end, you may end up with the problem of trying to maintain a company that you simply can’t afford.

Think you are ready to launch the process? LCCS can help.

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Still have queries? Check out our blog or feel free to get in touch!

* Before the expiration of the waiver!

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